First Time Home Buyer Incentive from the Government

On July 10, 2019, Jean-Yves Duclos, Federal Minister of Families, Children and Social Development, announced the new First-Time Home Buyer Incentive.

We’ve heard that there may be some misinformation being distributed among REALTORS®, and so we have compiled a detailed list of criteria and conditions for this new Incentive, which can be found below.
The Federal Government is also offering the opportunity to stay up-to-date about the First-Time Home Buyer Incentive as new changes become available. To sign up for these updates, please visit https://www.cmhc-schl.gc.ca/en/nhs/canada-first-time-home-buyer-incentive.

Below are the details, criteria and conditions of this new Incentive.

Details:

The new Incentive will start in September 2, 2019, with the first closing on November 1, 2019.

The aim of the Incentive is to help middle-class families take the first step towards home ownership.

For the purchase of an existing home, an incentive amount of five per cent may be available.

For the purchase of a newly constructed home, an incentive amount of five per cent or 10 per cent may be available.

This is a shared equity mortgage with the Government of Canada.

The government shares in the upside and downside of the change in the property value.

Criteria:

The incentive will allow eligible first-time home buyers who have the minimum down payment for an insured mortgage with CMHC, Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada.

The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

Eligible for Canadian citizens, permanent residents, and non-permanent residents who are legally authorized to work in Canada.

The incentive will be available to first-time home buyers with qualified annual household incomes up to $120,000.

The above-listed income (up to $120,000) is subject to qualifying income requirements set out by lenders and mortgage loan insurers.

At least one borrower must be a first-time home buyer.

DEFINITION: you have never purchased a home before; you have gone through a breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements); or in the last four years, you did not occupy a home that you or your current spouse or common-law partner owned.

The minimum down payment must come from traditional down payment sources. Traditional down payment comes from the borrower’s own resources and may include:

savings

withdrawal/collapse of a registered retirement savings plan (RRSP)

non-repayable financial gift from a relative

Note: Unsecured personal loans or unsecured lines of credit used to satisfy minimum down payment requirements are not eligible for the program.

A participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual household income.

Conditions:

No on-going repayments are required.

The incentive is not interest bearing.

The borrower can repay the Incentive at any time without a pre-payment penalty.

Refinancing of the first mortgage will not trigger repayment.

The Incentive is a second mortgage on the title of the property.

The first mortgage must be greater than 80 per cent of the value of the property and is subject to a mortgage loan insurance premium.

At the present time, the buyer must repay the incentive after 25 years or if the property is sold – whatever comes first.

The repayment of the Incentive is based on the property’s fair market value.

If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.